The contraction of the economy due to the pandemic caused the inflation index used to set the federal retiree COLA to fall by 0.7 percent in April, leaving now in negative territory at -0.3 percent through seven months of the counting period toward the January 2021 adjustment.
The count had been as high as 0.7 percent through the February count. If the inflation figure through the full 12 months, ending with the September count that is released in October, finishes in negative territory retirement benefits will be frozen but not reduced. That previously occurred for the 2016 COLA and before that for the 2010 and 2011 COLAs.
Cost-of-living-adjustments (COLAs) are effective on December 1 of each year and are applied to the annuity payments made the following month. COLAs for those retired less than one year are prorated according to the date on which they retired. If you retire in January, your first adjustment will be made in January of the following year and will be for 11/12ths of the COLA amount. If you retire in February it will be 10/12ths, and so forth. Future COLAs will be for the full amount.
More on COLAs – Federal Cost of Living Adjustments at ask.FEDweek.com